More than a month after Russia announced one of its biggest privatisations since the 1990s, selling a 19.5 per cent stake in its giant oil company Rosneft, it still isn’t possible to determine from public records the full identities of those who bought it.
The stake was sold for 10.2 billion euros to a Singapore investment vehicle that Rosneft said was a 50/50 joint venture between Qatar and the Swiss oil trading firm Glencore.
Unveiling the deal at a televised meeting with Rosneft’s boss Igor Sechin on December 7, President Vladimir Putin called it a sign of international faith in Russia, despite US and EU financial sanctions on Russian firms including Rosneft.
“It is the largest privatisation deal, the largest sale and acquisition in the global oil and gas sector in 2016,” Putin said.
It was also one of the biggest transfers of state property into private hands since the early post-Soviet years, when allies of President Boris Yeltsin took control of state firms and became billionaires overnight.
But important facts about the deal either have not been disclosed, cannot be determined solely from public records, or appear to contradict the straightforward official account of the stake being split 50/50 by Glencore and the Qataris.
For one, Glencore contributed only 300 million euros of equity to the deal, less than 3 per cent of the purchase price, which it said in a statement on December 10 had bought it an “indirect equity interest” limited to just 0.54 per cent of Rosneft.
In addition, public records show the ownership structure of the stake ultimately includes a Cayman Islands company whose beneficial owners cannot be traced.
And while Italian bank Intesa SanPaolo leant the Singapore vehicle 5.2 billion euros to fund the deal, and Qatar put in 2.5 billion, the sources of funding for nearly a quarter of the purchase price have not been disclosed by any of the parties.
“The main question in relation to this transaction, as ever, still sounds like this: Who is the real buyer of a 19.5 per cent stake in Rosneft?” Sergey Aleksashenko, a former deputy head of Russia’s central bank, wrote in a blog last week.
Glencore would not comment on the identity of the Cayman Islands firm.
The Qatari Investment Authority said it would not comment on the deal, beyond confirming that it has participated in it.
Rosneft declined to respond to questions posed be media, including a request for comment on how ownership of the 19.5 per cent stake was divided, information about the identity of the Cayman Islands buyer, or details of the source of any undisclosed sources of funds.
Like many large deals, the Rosneft privatisation uses a structure of shell companies owning shell companies, commonly referred to in Russia as a “matryoshka”, after the wooden nesting dolls that open to reveal a smaller doll inside.
Following the trail of ownership leads to a Glencore UK subsidiary and a company that shares addresses with the Qatari Investment Authority, but also to a firm registered in the Cayman Islands, which does not require companies to record publicly who owns them.
The Singapore-registered investment vehicle that holds the newly privatised 19.5 per cent stake in Rosneft is called QHG Shares.
It is owned by a London-registered limited liability partnership, QHG Investments, which in turn lists as one of its two owners another London-registered limited liability partnership, QHG Holding, created on Dec 5.
One of the partners in QHG Holding is QHG Cayman Limited, registered at an address of the Cayman Islands office of Walkers, an international law firm.
Jack Boldarin, Walkers managing partner in London, said the law firm would not be able to confirm whether any company was its client, or comment further.
The use of an offshore company is by itself no indication of wrongdoing, but it can make it impossible to determine the true owner of an asset from public records.
The Singapore vehicle is also the borrower for Intesa’s 5.2 billion euro loan, and QHG Holdings, the London partnership that includes the Cayman Islands firm, is a guarantor of that debt.
Banking experts say Intesa would be required by “know your customer” rules to verify the borrowers’ identities.
Regulators would exercise heightened scrutiny because of the size of the deal and the need to comply with sanctions on Russia. — Reuters
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